By Dr. Kat Lindley (originally published on X)
Most people have never heard of a pharmacy benefit manager. But nearly every one of them has felt what a PBM does.
They have felt it at the pharmacy counter, when a medicine they have taken for years suddenly “isn’t covered anymore.” They have felt it when a prescription sits for days waiting on a prior authorization. They have felt it when the pharmacy down the street, the one where the pharmacist knew their name, closed its doors.
Who are PBMs?
Pharmacy benefit managers sit between your insurance plan or employer, the drug companies, and your pharmacy. They build the formulary, the list of drugs your plan will cover. They negotiate with manufacturers. They decide which pharmacies are in network and what those pharmacies get paid.
It started as a paperwork job. It became one of the most powerful forces in American medicine. Three companies dominate: CVS Caremark, Express Scripts, and Optum Rx. The Federal Trade Commission found that together they processed nearly 80% of all prescriptions filled in the United States in 2023. Each one is owned by a giant health care company that also owns an insurer and its own mail-order and specialty pharmacies. The FTC found that pharmacies tied to the three largest PBMs bring in nearly 70% of all specialty drug revenue.
When the same company writes the rules, collects the money, and owns the pharmacy, the patient is rarely the one who comes out ahead.
The way that money works is through the spread pricing. A PBM can bill your health plan one price for a drug and pay the pharmacy less, keeping the difference. The plan doesn’t see it. The pharmacy doesn’t see it. And you, through your premiums, pay for it.
Rebates are an important part of this scheme. Drug makers pay PBMs rebates to get a good spot on the formulary. That sounds like savings, but rebates are calculated off the list price. A higher list price means a bigger rebate. The FTC’s insulin case alleged exactly this: that PBMs built a system where insulin makers competed on the size of their rebates rather than on lower prices, and that the inflated list prices hurt patients whose copays and coinsurance are tied to the list price.
Think about who that hurts most. A patient with a high deductible, or one paying coinsurance, pays based on that inflated list price. The rebate goes up the chain. The bill goes to the patient.
Markups on lifesaving drugs. In January 2025, the FTC released a second staff report on specialty generic drugs used to treat cancer, HIV, multiple sclerosis, and other serious conditions. It found that the big three PBMs marked up many of these drugs at their own pharmacies by hundreds, and sometimes thousands, of percent. Their affiliated pharmacies brought in more than $7.3 billion above the drugs’ estimated acquisition cost from 2017 to 2022. The PBMs also reimbursed their own pharmacies at higher rates than independent pharmacies on nearly every specialty generic the FTC examined. These are generic drugs. They are supposed to be the affordable option.
Here are some examples of “managing ways” to delay the care and every doctor knows this. They use formulary exclusions that drop a drug a patient is stable on; prior authorization that holds a prescription until someone far away signs off; step therapy, sometimes called “fail first,” which makes a patient try and fail a cheaper or preferred drug before getting the one their doctor prescribed, non-medical switching, where a stable patient is moved to a different drug for business reasons, not medical ones.
Each step comes with phone calls, faxes, appeals, and waiting. For a patient with diabetes, epilepsy, or a heart condition, waiting isn’t a small thing. When the decision is driven by which drug pays the best rebate, the doctor who examined the patient isn’t really the one making it.
PBMs push patients toward their own mail-order and specialty pharmacies. The FTC’s second report found that the most profitable specialty generics, the ones marked up more than $1,000 per prescription, were far more likely to be filled at PBM-owned pharmacies: 72% of those prescriptions, compared with 44% of specialty generics overall. The FTC staff said this pattern suggests steering.
Meanwhile, independent pharmacies are being squeezed by below-cost reimbursements and fees clawed back after the sale. Researchers writing in Health Affairs found that nearly 30% of U.S. pharmacies operating between 2010 and 2021 had closed by 2021, with closures concentrated in lower-income communities and those with more publicly insured patients. Today, the USC–NCPA Pharmacy Access Initiative estimates that roughly one in eight U.S. neighborhoods is a pharmacy desert. And when an older patient’s pharmacy closes, research shows they’re less likely to keep taking their heart medicines. A pharmacy isn’t just a store. For many rural and small-town families, it’s the most accessible health care professional they have.
Change is on the horizon. There is real movement, and it’s worth acknowledging.
In September 2024, the FTC sued the big three PBMs over insulin rebating. In February 2026, Express Scripts settled, agreeing among other things to stop favoring high list price versions of a drug over identical lower-priced versions and to offer plans a way to base patients’ out-of-pocket costs on a drug’s net cost instead of its inflated list price. Caremark and Optum Rx have since agreed to proposed settlements of their own.
Also in February 2026, Congress passed and the President signed PBM reforms in the Consolidated Appropriations Act of 2026. Starting in 2028, PBMs in Medicare Part D must be paid flat service fees that aren’t tied to a drug’s price or rebates, a change known as “delinking.” The law requires PBMs to pass 100% of rebates through to employer health plans and to report what they spend and earn. It also strengthens the rule that Part D plans must contract with any willing pharmacy, which helps protect independent pharmacies.
And just recently, the Labor Department finalized a rule requiring PBMs to disclose how they get paid to large self-insured employer plans, including manufacturer rebates, spread pricing, and money clawed back from pharmacies. Employers can audit those disclosures every year. It applies to plan years beginning on or after July 1, 2027.
We need sunlight, not more bureaucracy. I’m skeptical of most new government programs in health care. More layers rarely bring patients closer to their doctors. But this isn’t about Washington running your care. It’s about sunlight. The people paying the bills, employers, families, and patients, deserve to see where their money goes. A fair market can’t work when the prices are hidden.
The deeper fix is choice. The access to common generics at cash prices that are lower than the insurance copay is important, and every doctor’s office should strive to offer this to their patients. No formulary games. No spread. Just a price you can see before you pay.
Here is my advice:
- Ask your pharmacist for the cash price. (Sometimes it’s lower than your copay.)
- If your plan suddenly drops a medicine you’re stable on, ask your doctor about an appeal. (You have a right to one.)
- Support your local independent pharmacy. If you want it to be there, use it.
Medicine works best when the decision is between a patient and a doctor who knows them, not a middleman who profits from the confusion. Let’s take that decision back.
— Dr. Kat Lindley is a Board Certified Family Physician and Director of the International Fellowship Program at the Independent Medical Alliance.
